More storm clouds are building over Norwegian industrial plants, like Norsk Hydro’s aluminum operations in the mountains at Årdal. Local industrial players are more worried than ever that the next phase of the global finance crisis will hit their business much harder than the first onslaught in 2008.
They’re already seeing a drop in demand and tougher price competition in addition to the pressure on exports caused by Norway’s strong currency. Newspaper Dagens Næringsliv (DN) reported on Thursday that the Federation of Norwegian Industries (Norsk Industri) is laying new plans to ward off a freeze in local financing.
“The biggest threat for Norwegian business today is the possibility of major bank crises in Europe,” Knut E Sunde, director of branch and industrial policies for Norsk Industri, told DN. He thinks a new finance crisis in Europe will have a completely different effect than it did in 2008 and 2009, since central banks and national authorities have since used up much of their arsenal. Norway remains strong, and Prime Minister Jens Stoltenberg’s government still has an impressive arsenal of oil revenues to fend off a crisis at home, but Stoltenberg also has warned repeatedly and recently that Norwegian business and industry will be far from immune from a sharp, new economic downturn in Europe.
Sunde believes the chances that some European authorities will lose control are bigger now, and Norwegian banks will be just as vulnerable as they were in 2008.
Fine-tuning a plan
His industrial organization is thus fine-tuning a crisis plan to help Norwegian politicians quickly target and implement goal-oriented measures aimed at limiting the effects of a bank finance crisis. “We started working on this during the summer and are continuing to work on it through August,” Sunde told DN. It’s likely to feature funding requests for healthy businesses and strong projects that otherwise might lose bank financing regardless of their merits.
There’s already been specific signs of trouble for Norwegian industry, not least in the recent disappointing results for Norsk Hydro and, earlier this week, reports that Hydro’s aluminium plant in Årdal can be the next victim of major cost cutting. Hydro has been among the hardest hit by the economic crisis in Europe, as prices and demand for its aluminum have sunk.
It’s already cutting back on raw production and a Hydro spokesman told DN that the company is now evaluating the closure of one of its two major smelting operations in Årdal. The area’s surrounding county of Sogn og Fjordne has seen exports decline 1.8 percent in the first half of this year while export sales from Telemark County are down 46.4 percent, largely because of the shutdown in production at solar firm REC.
Economy still strong, but pessimism rises
Norway’s economy remains strong and overall export revenues are up because of its oil and gas sales, but other industrial sectors are struggling. Hydro, for example, has cut its number of employees by nearly 5,000 since the first finance crisis hit in 2008.
Morten Jensen, a strategic planner at Norway’s largest bank, DNB, is increasingly skeptical about the prospects for the Oslo Stock Exchange. July’s performance was strong, but analysts are pessimistic and Jensen thinks the exchange has been boosted by hopes that new measures will ward off crisis.
“If such measures don’t come, or don’t function as expected, the stock market can fall,” Jensen told DN. “The risk is higher.”
Views and News from Norway/Nina Berglund
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